Hungary shelves plans for Internet tax

By Edd Gent

Published Friday, October 31, 2014

Hungary's Prime Minister has shelved a planned tax on Internet use and said his government will reconsider the matter next year.

About 100,000 Hungarians rallied on Tuesday night to protest at the planned tax on data traffic as well as the broader issue of creeping authoritarianism Viktor Orban's centre-right government, which took power in 2010 and was re-elected by a landslide this year.

The scheme would have seen Internet service providers made to pay just under 40p per gigabyte of Internet traffic, though this was later proposed to be capped at different monthly rates for individual and business users.

The Internet data levy idea was first floated in the 2015 tax code submitted to parliament last week by Orban’s party Fidesz, triggering objections from Internet service providers and users who felt it was anti-democratic.

And today Orban said today the tax will not be introduced because "people have questioned the rationality" of the measure, but he added the government will hold a national consultation from mid-January about regulating and taxing the Internet. He added that Hungary would stick to its plan to offer broadband Internet access to every household by 2020.

Orban's government has already imposed special taxes on the banking, retail, energy and telecommunications sectors to keep the budget deficit in check, jeopardising profits in some parts of the economy and unnerving international investors.

Tuesday’s crowd, which was organised by a Facebook-based social network and appeared to draw mostly well-heeled professionals, marched through central Budapest demanding the repeal of the planned tax and the ouster of Orban.

Zsolt Varady, an Internet entrepreneur and founder of a now-defunct Hungarian social network iwiw.hu, told the crowd that the tax threatened to undermine Internet freedoms.

"Between 2002 and 2006 iwiw motivated many people to get an Internet subscription," Varady said. "People were willing to pay for the service because they knew, saw and felt that their lives were becoming better... The Internet tax threatens the further growth of the Internet as well as freedom of information."

The government had originally planned to tax Internet data transfers at a rate of 150 forints per gigabyte, but after analysts calculated this would total more than the sector's annual revenue and an initial protest drew thousands on Sunday, Fidesz submitted a bill that capped the tax at 700 forints per month for individuals and 5,000 forints for companies.

The Orban government denied any anti-democratic agenda, saying it aimed only to get all economic sectors to share the tax burden and was tapping into a trend of telecommunications shifting away from already-taxed telephony and text messages, but the European Commission also criticised the proposed tax earlier this week.

"It's part of a pattern of actions which have limited freedoms or sought to take rents without achieving a wider economic or social interest," said Ryan Heath, spokesman for outgoing Commission Vice President Neelie Kroes.

Heath said the tax was economically misguided because it was based on data traffic now growing rapidly around the world.